Oakland school leaders will need to make massive reductions in spending over the next few school years to avoid insolvency.
On Wednesday the Oakland Unified School District board approved its budget for the 2024-2025 school year. While the district will remain afloat next year, projections show a growing deficit beginning in the 2025-2026 year. Declining enrollment and attendance rates, costly new labor contracts, expiring one-time funds, and flat state funding have all contributed to the district’s circumstances.
At the same time, Oakland school district officials are hoping to pay off their outstanding state loan and be free of the financial oversight that came with it in 2026.
While the district has committed to raising salaries for teachers, staff, and administrators, it also means OUSD leaders must be selective about which investments will be less of a priority as a tradeoff. It means school board directors must take a hard look at the way the district’s central office is organized and make difficult decisions about reducing the number of schools it operates.
OUSD’s total budget for the 2024-2025 school year is $1.27 billion. The district expects to collect $1.09 billion in revenue. Budget projections show the district with a $56 million deficit in unrestricted funds beginning in 2025, which balloons to negative $145 million in 2026.
The district’s overall general fund balance stands at about $267 million now but this will continue dropping over the next two years until it is projected to be at negative $51 million at the end of the 2026-2027 school year.
“We are leaning heavily in 2024-2025 on our fund balance. What that’s going to do is make that fund balance unavailable, pending we don’t make adjustments,” said Chief Business Officer Lisa Grant-Dawson.
OUSD recently settled a contract with the union that represents school principals, and last year agreed to provide a sizable raise to teachers. The district has committed to raising salaries for all of its workers as a way to increase retention. Salaries for teachers and staff have been among the lowest in Alameda County, and a major driver of staff turnover.
This year, salaries for OUSD’s full-time employees totaled about $585 million. In next year’s budget, that amount will rise to over $651 million.
Superintendent Kyla Johnson-Trammell, who has led the district from near-insolvency in 2017 and through two teachers strikes over stalled contract negotiations in 2019 and 2023, asked Grant-Dawson to paint a picture of what could happen if the board wavers on cutting back.
“If we decide to do nothing, I will communicate to the superintendent that the district will be bankrupt and then we will communicate that to our county partners if there is no plan. The district will re-enter state receivership,” Grant-Dawson told the board Wednesday. “We have come so far—we are not borrowing cash from the county as we were previously, we’re managing our resources effectively, our audit findings are declining, and we are now able to be a banner district for compensation. We don’t want to go back.”
An agency called Public Works LLC analyzed the district’s central office last year and presented to the board a plan to consider downsizing that would save about $3.5 million. In April, the board also took its first steps towards establishing guidelines for closing schools. The board approved legally required metrics to evaluate which schools to consider closing, should district leaders choose to do so.
OUSD is not alone in facing a tighter budget. Berkeley Unified cut its spending by millions, and across the Bay, the state has appointed fiscal monitors to oversee San Francisco Unified. The city of Oakland, too, is facing a structural deficit and could be forced to slash department budgets and lay off staff if the sale of its 50% stake in the Coliseum doesn’t go through.
Superintendent Johnson-Trammell said it’s important to keep attendance high since a large proportion of district revenues are based on average daily attendance rates. OUSD finished this year with an average daily attendance rate of about 89.7%. Prior to the pandemic, average attendance hovered around 94% in OUSD.
“If we can increase ADA, that’s going to bring in more dollars as we are projecting what our revenue is going to be. That’s more resources we can use to invest in salaries and school support,” she said.
The board unanimously approved the budget. By October, the board is expected to identify areas to cut, and next February the board will likely be voting on budget adjustments when new revenue and cost estimates are available.
Wednesday was the last school board meeting of the academic year. The board takes a recess in July, and will return for its next regular meeting on Aug. 14.
